Kokomochi is considering the launch of an advertising


Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 3.53 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $ 8.34 million this year and $ 6.34 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $ 2.15 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 33 %, and its gross profit margin averages 24 % for all other products. The company's marginal corporate tax rate is 40 % both this year and next year. What are the incremental earnings associated with the advertising campaign. Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign. Incremental Earnings Forecast ($ million) Sales of Mini Mochi Munch $ Other Sales $ Cost of Goods Sold $ Gross Profit $ Selling, General, and Administrative $ Depreciation $ EBIT $ Income Tax at 40% $ Incremental Earnings $ Incremental Earnings Forecast ($ million) Sales of Mini Mochi Munch $ 1 Other Sales $ Cost of Goods Sold $ Gross Profit $ Selling, General, and Administrative $ Depreciation $ EBIT $ Income Tax at 40% $ Incremental Earnings $

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Financial Management: Kokomochi is considering the launch of an advertising
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